Advantages and disadvantages of holding stock

• Advantages


  Consumer demand can be met when stock available

  Alternatives can be offered thereby generating income instead of losing sales

  Reduces lead times between order and delivery

  Opportunity to generate immediate revenue

  Can be moved to distribution centres

  Asset an of value to the business → if managed effectively, can reflect sound financial management

  Making goods in bulk may reduce costs → economics of scale in purchasing discounted inputs
• Disadvantages


  Costs → storage charges, spoilage, insurance, theft and handling expenses

  Invested capital, labour and energy cannot be used elsewhere as it has been used to create the stock

  Cost of obsolescence (outdated) which can occur is stock remains unsold for an extended period of time